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Hours Worked and Permanent Technology Shocks in Open Economies

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  • Martial Dupaigne

    ()

  • Patrick Fève

    ()

Abstract

We use Structural Vector Autoregressions to study the impact of technology improvements on hours worked in the major seven countries. While previous studies estimate the response of labor input to permanent shocks to country -level labor productivity, we consider the response of labor input to aggregate -level labor productivity. Since labor productivities do cointegrate in the G7, the estimated responses should look very similar. They do not: for each country but Germany, the responses estimated using G7 labor productivity sizeably exceed those estimated using country -level labor productivity. These results also hold in larger SVAR models.

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Bibliographic Info

Article provided by Springer in its journal Open Economies Review.

Volume (Year): 21 (2010)
Issue (Month): 1 (February)
Pages: 69-86

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Handle: RePEc:kap:openec:v:21:y:2010:i:1:p:69-86

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Web page: http://www.springerlink.com/link.asp?id=100323

Related research

Keywords: Technology shocks; Technology shocks; Vector autoregressions; Open economies; C32; E32; F41;

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  1. Christopher J. Erceg & Luca Guerrieri, 2004. "Can Long-Run Restrictions Identify Technology Shocks?," Computing in Economics and Finance 2004, Society for Computational Economics 3, Society for Computational Economics.
  2. Jordi Galí & Pau Rabanal, 2004. "Technology Shocks and Aggregate Fluctuations," IMF Working Papers 04/234, International Monetary Fund.
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  4. Lawrence J. Christiano & Martin Eichenbaum & Robert Vigfusson, 2004. "The Response of Hours to a Technology Shock: Evidence Based on Direct Measures of Technology," Journal of the European Economic Association, MIT Press, MIT Press, vol. 2(2-3), pages 381-395, 04/05.
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  8. Gali, J., 1996. "Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?," Working Papers, C.V. Starr Center for Applied Economics, New York University 96-28, C.V. Starr Center for Applied Economics, New York University.
  9. Pau Rabanal & Juan Francisco Rubio-Ramirez & Vicente Tuesta Reátegui, 2010. "Cointegrated TFP Processes and International Business Cycles," Working Papers, Duke University, Department of Economics 10-11, Duke University, Department of Economics.
  10. Martial Dupaigne & Patrick Feve, 2009. "Technology shocks around the world," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(4), pages 592-607, October.
  11. Chari, V.V. & Kehoe, Patrick J. & McGrattan, Ellen R., 2008. "Are structural VARs with long-run restrictions useful in developing business cycle theory?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 55(8), pages 1337-1352, November.
  12. Francis, Neville & Ramey, Valerie A., 2005. "Is the technology-driven real business cycle hypothesis dead? Shocks and aggregate fluctuations revisited," Journal of Monetary Economics, Elsevier, Elsevier, vol. 52(8), pages 1379-1399, November.
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